SAN JOSE, CA--(Marketwire - Nov 13, 2012) - Cisco (
Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its first quarter results for the period ended October 27, 2012. Cisco reported first quarter net sales of $11.9 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.1 billion or $0.39 per share, and non-GAAP net income of $2.6 billion or $0.48 per share.
"We delivered record results this quarter -- with revenue growth of 6 percent and strong earnings per share growth -- demonstrating our vision and strategy are working," said John Chambers, chairman and chief executive officer, Cisco. "Our innovation engine, operational discipline and on-going evolution are enabling us to differentiate in the market."
Chambers continued, "Cisco is at the center of the major market transitions -- cloud, mobility, video -- and yet we believe the largest market transition lies ahead of us, as the Internet of Everything becomes a reality. Cisco has the unique ability to turn information that will flow across networks into new capabilities and richer experiences. The Internet of Everything will create unprecedented possibilities for businesses, individuals and countries, and Cisco is poised to lead and fully maximize the opportunities of this evolution."
GAAP Results | |||||||||
Q1 2013 | Q1 2012 | Vs. Q1 2012 | |||||||
Net Sales | $ | 11.9 billion | $ | 11.3 billion | 5.5 | % | |||
Net Income | $ | 2.1 billion | $ | 1.8 billion | 17.7 | % | |||
Earnings per Share | $ | 0.39 | $ | 0.33 | 18.2 | % | |||
Non-GAAP Results | |||||||||
Q1 2013 | Q1 2012 | Vs. Q1 2012 | |||||||
Net Income | $ | 2.6 billion | $ | 2.3 billion | 10.6 | % | |||
Earnings per Share | $ | 0.48 | $ | 0.43 | 11.6 | % | |||
A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 5.
Cisco will discuss first quarter results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.
Cash and Cash Equivalents and Investments
Dividends and Stock Repurchase Program
During the first quarter of fiscal 2013:
"Once again, we delivered strong financial performance with continued execution on our long-term strategy of growing profits faster than revenue and driving long-term value to our shareholders," stated Frank Calderoni, executive vice president and chief financial officer, Cisco. "We remain confident in our financial strategy and in our ability to consistently execute moving forward."
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About Cisco
Cisco (
This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as statements regarding our innovation engine and operational strategies, operational discipline and execution, the evolution of our industry, major market transitions and our position with respect to such transitions) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain priorities, including our foundational priorities, and in certain geographical locations; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and service markets, including the data center; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent report on Form 10-K filed on September 12, 2012. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent report on Form 10-K as it may be amended from time to time. Cisco's results of operations for the three months ended October 27, 2012 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.
This release includes non-GAAP net income, non-GAAP net income per share data and non-GAAP inventory turns.
These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.
Cisco believes that the presentation of non-GAAP net income and non-GAAP net income per share data, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, Cisco believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the period presented.
For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, other acquisition-related costs, significant asset impairments and restructurings, the income tax effects of the foregoing, and significant tax matters. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future, there may be other items, such as significant gains or losses from contingencies that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results.
For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.
Copyright © 2012 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco UCS, Cisco Unified Computing System, StadiumVision, and Videoscape are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to this URL: www.cisco.com/go/trademarks. Third party trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
(In millions, except per-share amounts) | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended | ||||||||||
October 27, 2012 |
October 29, 2011 |
|||||||||
NET SALES: | ||||||||||
Product | $ | 9,297 | $ | 8,952 | ||||||
Service | 2,579 | 2,304 | ||||||||
Total net sales | 11,876 | 11,256 | ||||||||
COST OF SALES: | ||||||||||
Product | 3,748 | 3,563 | ||||||||
Service | 889 | 803 | ||||||||
Total cost of sales | 4,637 | 4,366 | ||||||||
GROSS MARGIN | 7,239 | 6,890 | ||||||||
OPERATING EXPENSES: | ||||||||||
Research and development | 1,431 | 1,375 | ||||||||
Sales and marketing | 2,416 | 2,452 | ||||||||
General and administrative | 560 | 552 | ||||||||
Amortization of purchased intangible assets | 122 | 99 | ||||||||
Restructuring and other charges | 59 | 202 | ||||||||
Total operating expenses | 4,588 | 4,680 | ||||||||
OPERATING INCOME | 2,651 | 2,210 | ||||||||
Interest income | 161 | 164 | ||||||||
Interest expense | (148 | ) | (148 | ) | ||||||
Other income (loss), net | (33 | ) | 19 | |||||||
Interest and other income (loss), net | (20 | ) | 35 | |||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,631 | 2,245 | ||||||||
Provision for income taxes | 539 | 468 | ||||||||
NET INCOME | $ | 2,092 | $ | 1,777 | ||||||
Net income per share: | ||||||||||
Basic | $ | 0.39 | $ | 0.33 | ||||||
Diluted | $ | 0.39 | $ | 0.33 | ||||||
Shares used in per-share calculation: | ||||||||||
Basic | 5,301 | 5,394 | ||||||||
Diluted | 5,334 | 5,407 | ||||||||
Cash dividends declared per common share | $ | 0.14 | $ | 0.06 | ||||||
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME | ||||||||||
(In millions, except per-share amounts) | ||||||||||
Three Months Ended | ||||||||||
October 27, 2012 |
October 29, 2011 |
|||||||||
GAAP net income | $ | 2,092 | $ | 1,777 | ||||||
Adjustments to cost of sales: | ||||||||||
Share-based compensation expense | 45 | 50 | ||||||||
Amortization of acquisition-related intangible assets | 134 | 87 | ||||||||
Impact to cost of sales from purchase accounting adjustments to inventory | 24 | -- | ||||||||
Significant asset impairments and restructurings | -- | (5 | ) | |||||||
Total adjustments to GAAP cost of sales | 203 | 132 | ||||||||
Adjustments to operating expenses: | ||||||||||
Share-based compensation expense | 264 | 291 | ||||||||
Amortization of acquisition-related intangible assets | 122 | 99 | ||||||||
Other acquisition-related costs | 15 | 8 | ||||||||
Significant asset impairments and restructurings | 59 | 202 | ||||||||
Total adjustments to GAAP operating expenses | 460 | 600 | ||||||||
Total adjustments to GAAP income before provision for income taxes | 663 | 732 | ||||||||
Income tax effect | (186 | ) | (187 | ) | ||||||
Non-GAAP net income | $ | 2,569 | $ | 2,322 | ||||||
Diluted net income per share: | ||||||||||
GAAP | $ | 0.39 | $ | 0.33 | ||||||
Non-GAAP | $ | 0.48 | $ | 0.43 | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In millions) | |||||||
(Unaudited) | |||||||
October 27, 2012 | July 28, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 4,773 | $ | 9,799 | |||
Investments | 40,227 | 38,917 | |||||
Accounts receivable, net of allowance for doubtful accounts of $224 at October 27, 2012 and $207 at July 28, 2012 | 3,942 | 4,369 | |||||
Inventories | 1,709 | 1,663 | |||||
Financing receivables, net | 3,726 | 3,661 | |||||
Deferred tax assets | 2,253 | 2,294 | |||||
Other current assets | 1,277 | 1,230 | |||||
Total current assets | 57,907 | 61,933 | |||||
Property and equipment, net | 3,409 | 3,402 | |||||
Financing receivables, net | 3,695 | 3,585 | |||||
Goodwill | 20,443 | 16,998 | |||||
Purchased intangible assets, net | 3,449 | 1,959 | |||||
Other assets | 3,740 | 3,882 | |||||
TOTAL ASSETS | $ | 92,643 | $ | 91,759 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 55 | $ | 31 | |||
Accounts payable | 889 | 859 | |||||
Income taxes payable | 200 | 276 | |||||
Accrued compensation | 2,710 | 2,928 | |||||
Deferred revenue | 8,721 | 8,852 | |||||
Other current liabilities | 4,539 | 4,785 | |||||
Total current liabilities | 17,114 | 17,731 | |||||
Long-term debt | 16,272 | 16,297 | |||||
Income taxes payable | 1,577 | 1,844 | |||||
Deferred revenue | 3,902 | 4,028 | |||||
Other long-term liabilities | 1,077 | 558 | |||||
Total liabilities | 39,942 | 40,458 | |||||
Total equity | 52,701 | 51,301 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 92,643 | $ | 91,759 | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
(In millions) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | ||||||||||||
October 27, 2012 | October 29, 2011 | |||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 2,092 | $ | 1,777 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation, amortization, and other | 612 | 621 | ||||||||||
Share-based compensation expense | 306 | 341 | ||||||||||
Provision for receivables | 29 | (13 | ) | |||||||||
Deferred income taxes | 135 | 109 | ||||||||||
Excess tax benefits from share-based compensation | (15 | ) | (21 | ) | ||||||||
Net losses (gains) on investments | 15 | (13 | ) | |||||||||
Change in operating assets and liabilities, net of effects of acquisitions and divestitures: | ||||||||||||
Accounts receivable | 615 | 399 | ||||||||||
Inventories | 42 | (168 | ) | |||||||||
Financing receivables | (132 | ) | (9 | ) | ||||||||
Other assets | 99 | (374 | ) | |||||||||
Accounts payable | (19 | ) | 36 | |||||||||
Income taxes, net | (372 | ) | (38 | ) | ||||||||
Accrued compensation | (359 | ) | (548 | ) | ||||||||
Deferred revenue | (295 | ) | 232 | |||||||||
Other liabilities | (288 | ) | 2 | |||||||||
Net cash provided by operating activities | 2,465 | 2,333 | ||||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of investments | (8,213 | ) | (11,770 | ) | ||||||||
Proceeds from sales of investments | 2,447 | 7,721 | ||||||||||
Proceeds from maturities of investments | 4,388 | 1,179 | ||||||||||
Acquisition of property and equipment | (265 | ) | (265 | ) | ||||||||
Acquisition of businesses, net of cash and cash equivalents acquired | (4,912 | ) | (38 | ) | ||||||||
Purchases of investments in privately held companies | (9 | ) | (153 | ) | ||||||||
Return of investments in privately held companies | 12 | 58 | ||||||||||
Other | 22 | 77 | ||||||||||
Net cash used in investing activities | (6,530 | ) | (3,191 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Issuances of common stock | 117 | 203 | ||||||||||
Repurchases of stock - repurchase program | (183 | ) | (1,744 | ) | ||||||||
Shares repurchased for tax withholdings on vesting of restricted stock units | (203 | ) | (137 | ) | ||||||||
Short-term borrowings, maturities less than 90 days, net | 23 | -- | ||||||||||
Excess tax benefits from share-based compensation | 15 | 21 | ||||||||||
Dividends paid | (744 | ) | (322 | ) | ||||||||
Other | 14 | (78 | ) | |||||||||
Net cash used in financing activities | (961 | ) | (2,057 | ) | ||||||||
Net decrease in cash and cash equivalents | (5,026 | ) | (2,915 | ) | ||||||||
Cash and cash equivalents, beginning of period | 9,799 | 7,662 | ||||||||||
Cash and cash equivalents, end of period | $ | 4,773 | $ | 4,747 | ||||||||
Cash paid for: | ||||||||||||
Interest | $ | 221 | $ | 220 | ||||||||
Income taxes | $ | 776 | $ | 398 | ||||||||
Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.
ADDITIONAL FINANCIAL INFORMATION | |||||||||
(In millions) | |||||||||
(Unaudited) | |||||||||
October 27, 2012 | July 28, 2012 | ||||||||
CASH AND CASH EQUIVALENTS AND INVESTMENTS | |||||||||
Cash and cash equivalents | $ | 4,773 | $ | 9,799 | |||||
Fixed income securities | 38,464 | 37,297 | |||||||
Publicly traded equity securities | 1,763 | 1,620 | |||||||
Total | $ | 45,000 | $ | 48,716 | |||||
INVENTORIES | |||||||||
Raw materials | $ | 101 | $ | 127 | |||||
Work in process | 36 | 35 | |||||||
Finished goods: | |||||||||
Distributor inventory and deferred cost of sales | 671 | 630 | |||||||
Manufactured finished goods | 615 | 597 | |||||||
Total finished goods | 1,286 | 1,227 | |||||||
Service-related spares | 237 | 213 | |||||||
Demonstration systems | 49 | 61 | |||||||
Total | $ | 1,709 | $ | 1,663 | |||||
PROPERTY AND EQUIPMENT, NET | |||||||||
Land, buildings, and building & leasehold improvements | $ | 4,458 | $ | 4,363 | |||||
Computer equipment and related software | 1,491 | 1,469 | |||||||
Production, engineering, and other equipment | 5,495 | 5,364 | |||||||
Operating lease assets | 312 | 300 | |||||||
Furniture and fixtures | 494 | 487 | |||||||
12,250 | 11,983 | ||||||||
Less accumulated depreciation and amortization | (8,841 | ) | (8,581 | ) | |||||
Total | $ | 3,409 | $ | 3,402 | |||||
OTHER ASSETS | |||||||||
Deferred tax assets | $ | 2,061 | $ | 2,270 | |||||
Investments in privately held companies | 830 | 858 | |||||||
Other | 849 | 754 | |||||||
Total | $ | 3,740 | $ | 3,882 | |||||
DEFERRED REVENUE | |||||||||
Service | $ | 8,753 | $ | 9,173 | |||||
Product: | |||||||||
Unrecognized revenue on product shipments and other deferred revenue | 3,074 | 2,975 | |||||||
Cash receipts related to unrecognized revenue from two-tier distributors | 796 | 732 | |||||||
Total product deferred revenue | 3,870 | 3,707 | |||||||
Total | $ | 12,623 | $ | 12,880 | |||||
Reported as: | |||||||||
Current | $ | 8,721 | $ | 8,852 | |||||
Noncurrent | 3,902 | 4,028 | |||||||
Total | $ | 12,623 | $ | 12,880 | |||||
SUMMARY OF SHARE-BASED COMPENSATION EXPENSE | |||||||
(In millions) | |||||||
Three Months Ended | |||||||
October 27, 2012 |
October 29, 2011 |
||||||
Cost of sales -- product | $ | 10 | $ | 13 | |||
Cost of sales -- service | 35 | 37 | |||||
Share-based compensation expense in cost of sales | 45 | 50 | |||||
Research and development | 84 | 101 | |||||
Sales and marketing | 130 | 142 | |||||
General and administrative | 50 | 48 | |||||
Restructuring and other charges | (3 | ) | -- | ||||
Share-based compensation expense in operating expenses | 261 | 291 | |||||
Total share-based compensation expense | $ | 306 | $ | 341 | |||
The income tax benefit for share-based compensation expense was $79 million and $90 million for the three months ended October 27, 2012 and October 29, 2011, respectively.
ACCOUNTS RECEIVABLE AND DSO | |||||||||
(In millions, except DSO) | |||||||||
October 27, 2012 | July 28, 2012 | October 29, 2011 | |||||||
Accounts receivable | $ | 3,942 | $ | 4,369 | $ | 4,300 | |||
Days sales outstanding in accounts receivable (DSO) | 30 | 34 | 35 | ||||||
INVENTORY TURNS AND RECONCILIATION OF GAAP TO NON-GAAP | ||||||||||||||
COST OF SALES USED IN INVENTORY TURNS | ||||||||||||||
(In millions, except annualized inventory turns) | ||||||||||||||
Three Months Ended | ||||||||||||||
October 27, 2012 | July 28, 2012 | October 29, 2011 | ||||||||||||
Annualized inventory turns- GAAP | 11.0 | 11.7 | 11.2 | |||||||||||
Cost of sales adjustments | (0.5 | ) | (0.4 | ) | (0.3 | ) | ||||||||
Annualized inventory turns- non-GAAP | 10.5 | 11.3 | 10.9 | |||||||||||
GAAP cost of sales | $ | 4,637 | $ | 4,605 | $ | 4,366 | ||||||||
Cost of sales adjustments: | ||||||||||||||
Share-based compensation expense | (45 | ) | (54 | ) | (50 | ) | ||||||||
Amortization of acquisition-related intangible assets | (134 | ) | (100 | ) | (87 | ) | ||||||||
Impact to cost of sales from purchase accounting adjustments to inventory | (24 | ) | -- | -- | ||||||||||
Significant asset impairments and restructurings | -- | 5 | 5 | |||||||||||
Non-GAAP cost of sales | $ | 4,434 | $ | 4,456 | $ | 4,234 | ||||||||
REPURCHASE OF COMMON STOCK AND DIVIDENDS PAID | |||||||||||||||
(In millions) | |||||||||||||||
Three Months Ended | October 27, 2012 | July 28, 2012 | April 28, 2012 | January 28, 2012 | October 29, 2011 | ||||||||||
Repurchase of common stock under the stock repurchase program | $ | 253 | $ | 1,800 | $ | 550 | $ | 466 | $ | 1,544 | |||||
Dividends paid | 744 | 425 | 432 | 322 | 322 | ||||||||||
Total | $ | 997 | $ | 2,225 | $ | 982 | $ | 788 | $ | 1,866 | |||||
Contact Information:
Press Contact:
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Investor Relations Contact:
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